Households in England and Wales are braced for an average 3.5% hike in their water bills, regulator Ofwat said on Tuesday.
Households will pay an average of £388 from April 2013 to March 2014 - 0.5% above the rate of inflation. Bills in some parts of the country will rise as high as 5.3%.
Water bills are set to rise
Ofwat chief executive Regina Finn said: "Back in 2009, companies wanted bills rises of 10% above inflation. That didn't chime with what customers told us they wanted, so we said they could only increase bills in line with inflation.
"We understand that there is huge pressure on household incomes, and any rise is unwelcome. Inflation is driving these increases."
"We will make sure customers get value for money and if companies fall short in delivering their investment promises, we will take action," Ms Finn added.
"In the past seven years, we have made companies pay out around £550 million where they have underperformed."
The new charges will vary for households depending on their supplier and whether they have a water meter, Ofwat said.
The increased bills will help pay for an investment programme worth about £25 billion between 2010 and 2015, the regulator added.
Thames Water will see the biggest percentage rise in water and sewerage bills with an increase of 5.5%, leaving households with an average bill of £354, according to Ofwat.
Southern Water bills will rise by 5.3% with an average payment of £449 while households supplied by Wessex Water will face an average bill of £478 - an increase of 4.9%.
Those supplied by South West Water will see bills fall by 7.3% after the Government pledged contributions to reduce each household's bill by £50.
However, water and sewerage bills in the region remain the highest in the country, with households paying an average of £499.
Last week Ofwat announced proposals to change the way it regulates the water and sewerage sectors to ensure more sustainable water use.
The regulator also welcomed a report on the Draft Water Bill, which has identified potential benefits of £2 billion by changing the way water is managed.
Ms Finn said: "There are longer-term challenges if we are to continue to keep bills down.
"Unpredictable rainfall and population growth in areas where water is already stretched means we need to get better at managing and sharing our water. If we don't, customers will lose out.
"Our proposed changes, combined with recommendations in the Draft Water Bill, mean there is a total of £3 billion worth of benefit on the table for customers if we make the right changes.
"We cannot afford to stand still if our water supplies are to remain both affordable and sustainable in the decades to come."
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